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News arrivals, jumps and variance in stock markets

The doctoral dissertation of Ye Yue explores the impact of news arrivals on the abrupt large changes (Jumps) and the fluctuation (Variance) in stock prices in Nordic and U.S. markets.

News containing important financial and economic information play a crucial role in the process of investment and trading in financial markets.

“Sudden large changes and strong fluctuations observed in asset prices are normally related to the arrival of certain important news. However, the relationship between market reaction and news flow is complex and ambiguous,” says Ye Yue.

The dissertation of MSc Ye Yue focuses on two classes of important news — firm-specific and macroeconomic announcements — and their impact on jumps and variance of stock prices. Jumps, as abnormally large returns, and variance, measuring market fluctuations, are the two most important financial risk variables. A clear investigation into the impact of these two classes of news on jumps and variance substantially contributes to financial risk management. Accordingly, a new nonparametric statistical framework is developed.

“My research results show that Nordic scheduled firm-level announcements clearly influence the post-announcement jump process across the Finnish, Swedish, and Danish markets. However, I found non-scheduled announcements to be related to jumps only in the Copenhagen and Helsinki exchange data but not in the Stockholm exchange data”, describes Yue. 

Additionally, Yue found some evidence showing that jumps are distributed abnormally in equity prices preceding company announcements in the Finnish and Danish stock markets, possibly indicating information leakage. Regarding the impact of U.S. macroeconomic announcements on variance, he investigated the effect of macroeconomic news arrivals on classical conditional variance models (GARCH). Scheduled macroeconomic announcements are sufficiently captured by classical non-affine GARCH models. Furthermore, non-affine GARCH models with and without news impacts always outperform affine GARCH models in terms of option valuation.

Public defense of a doctoral dissertation on Monday, 20 November 2017

The doctoral dissertation of MSc Ye Yue in the field of finance titled “News Arrivals, Jumps and Variance in Stock Markets” will be publicly examined at the Department of Industrial and Information Management of Tampere University of Technology (TUT) in Auditorium Pieni Sali 1 in the Festia building (address: Korkeakoulunkatu 8, Tampere, Finland) at 12:00 on Monday, 20 November 2017. The opponent will be Professor Seppo Pynnönen from the Department of Mathematics and Statistics, University of Vaasa. Professor Juho Kanniainen from the Department of Industrial and Information Management at TUT will act as Chairman.

Mr. Ye Yue comes from China. He worked as a Marie Curie researcher in the HPCFinance project (www.hpcfinance.eu) at the Department of Industrial and Information Management at TUT.

Further information:  Ye Yue, tel. +358 (0)50 301 0130, ye.yue@tut.fi

News submitted by: Sanna Kähkönen
Keywords: science and research, industrial and information management